Practice Test Geeks(CFM) Certified Fund Manager Practice Test
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Regulatory Compliance & Ethical Standards Flashcards

7 cards from real CFM practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Regulatory Compliance & Ethical Standards flashcards as text

  1. Under the Investment Advisers Act of 1940, which activity requires SEC registration as an investment adviser?

    Answer: Managing a private hedge fund with 15 or more clients and $110M+ AUM

    Advisers managing over $110 million AUM with 15+ clients generally must register with the SEC under the Investment Advisers Act of 1940.

  2. The CFM Code of Ethics requires fund managers to disclose conflicts of interest:

    Answer: Promptly and fully before the conflict can affect investment decisions

    Ethical standards require prompt and full disclosure of conflicts before they can influence investment decisions affecting clients.

  3. A fund manager receives a large gift from a broker-dealer whose services the fund uses. What is the most appropriate ethical response?

    Answer: Decline or return the gift and report it to the compliance officer

    Accepting gifts from service providers creates a conflict of interest; the appropriate action is to decline or return it and notify compliance.

  4. Which SEC rule requires fund managers to adopt written compliance policies and procedures?

    Answer: Rule 206(4)-7

    SEC Rule 206(4)-7 requires registered investment advisers to adopt and implement written compliance policies and procedures reasonably designed to prevent violations.

  5. Front-running in fund management occurs when a manager:

    Answer: Trades in personal accounts ahead of executing known fund orders to profit from price movement

    Front-running is the illegal practice of trading personal accounts based on advance knowledge of pending fund orders that will move the market.

  6. The Investment Company Act of 1940 requires that a majority of a mutual fund's board of directors must be:

    Answer: Independent directors not affiliated with the fund's investment adviser

    The Investment Company Act requires a majority of fund board members to be independent directors unaffiliated with the fund's investment adviser.

  7. Under ERISA's fiduciary standards, a fund manager overseeing pension assets must primarily act in the interest of:

    Answer: Plan participants and beneficiaries

    ERISA's fiduciary duty requires fund managers handling pension assets to act solely in the interest of plan participants and beneficiaries.